A person can only take so much until they crack. The nonstop calls from collection agencies, the threatening letters…the lack of funds can drive even the strongest soul into despair.

In fact as the Great Recession dawned in 2008, the country experienced a spike in murder-suicide cases due to economic pressures. Manhattan psychologist, Joseph Cilona says that he saw a direct increase in violet crime as the recession dug in deep.

"Money and financial success and security are very closely tied to both physical and psychological well-being and self-esteem. Without that, there is an increase in general feelings of hopelessness, and dissatisfaction with life circumstances. All of these issues can be associated with suicidal thinking and violent behavior."

Of course stable people don’t typically go completely off the deep end. A Johns Hopkins University study concluded that while unemployment contributes to violent behavior, typically murder-suicide results only if the individual has a history of domestic violence.

But even the most grounded individual can be pushed only so far until they finally throw up their hands. Collection agents are highly persistent and sometimes nasty in their attempt to collect a debt. Desperate to make the calls and threats stop, many people turn to bankruptcy.

Why Not Just File Bankruptcy?

Although bankruptcy will make the calls stop, it will leave deep scars on your credit report. According to financial guru, Dave Ramsey, bankruptcy is never the answer. He writes about bankruptcy on his website and says, “Bankruptcy is not something I recommend any more than I would recommend divorce.”

He says that people often feel that bankruptcy is an easy way to start over when in reality it is a, “gut-wrenching, life-changing event that causes lifelong damage.”

Ramsey continues by saying that bankruptcy is listed as one of the top five life-altering negative events in person’s life, along with divorce, severe illness, disability and the loss of a loved one.

Why is bankruptcy so bad? Once you’ve filed for bankruptcy:

Your credit score is reduced anywhere from 150 to 250 points

The bankruptcy listing remains on your credit report for up to 10 years

You will literally have to rebuild your credit from scratch - which is a time consuming process

You cannot obtain a mortgage for at least two years

Even obtaining an auto loan is difficult

So on one hand the creditors stop calling, but on the other hand no one will call you, especially a mortgage lender.

Debt Management Plan (DMP) - the Smarter Option

As much as you’d love to have the bankruptcy fairy waive a wand and make the debt go, “poof” you know deep down all you’ll be stuck with is an ugly toad.

Although turning to a debt management plan (DMP) may not erase the debt, it will reconfigure what you owe to a more manageable level.

The first step to wrangling debt under control is to meet with a certified credit counselor. A credit counselor will advise you on how to manage your money assist you with creating a strategic plan on how to chip away at payments.

If you have too much overwhelming debt or are unable to repay the debt, the credit counselor may recommend you enroll in a debt management program (DMP).

Instead of declaring bankruptcy, your DMP representative will meet with your creditors to negotiate the amount you owe. The discussion may also focus on lowering interest rates and waiving fees.

Once your DMP representative comes to an agreement with your creditors, your representative will review the agreement and determine how much you should pay toward your debts each month. Typically the payments will be made through the credit-counseling agency.

Less than five year payment timeline - which can take 48 months or possibly longer

Debt Negotiation - another Option to Bankruptcy

Debt negotiation is another way to avoid bankruptcy. Debt negotiation is when a credit counseling firm arranges for your debt to be paid off anywhere from 10 to 70% of the balance owed.

Typically the credit-counseling firm asks you to freeze payments to your creditors while they negotiate a settlement. You will pay the credit counseling service directly to cover the remaining debt, along with other associated fees.